As competition intensifies in Nigeria’s downstream sector, no fewer than 70 tank farm owners have halted operations over the past two years, leaving their facilities abandoned. This mass closure, affecting 65% of the country’s 120 approved storage depots, comes as fuel retailers and station owners increasingly bypass these facilities in favor of alternative trucking options.
Investigations by The PUNCH reveal that this decline is primarily due to the removal of the fuel subsidy by President Bola Tinubu’s administration. This policy shift resulted in a staggering 488% rise in petrol prices, significantly reducing the purchasing power of fuel marketers.
What Are Tank Farms?
A tank farm is a storage facility for petroleum products, often situated in coastal locations where marine tankers discharge fuel. These facilities play a crucial role in ensuring steady fuel distribution and mitigating price fluctuations.
Lagos State houses some of Nigeria’s largest tank farms, concentrated in Apapa, Ijegun, and Ojo, including Satellite Town. Before the subsidy removal on May 29, 2023, tank farms were essential for meeting the nation’s daily petroleum needs, as Nigeria relied heavily on fuel imports.
Impact of Fuel Subsidy Removal
Data from the National Bureau of Statistics indicates that the cost of petrol imports soared by 105.3% in 2024, reaching N15.42 trillion, up from N7.51 trillion in 2023. Many tank farms, particularly in Ijegun, faced severe operational setbacks due to high importation costs, leading to facility shutdowns and economic distress for surrounding communities.
In addition, a 2023 PUNCH report highlighted complaints from Ijegun residents about the negative environmental and social impact of tank farms. Many had to relocate due to the congestion and infrastructural deterioration caused by fuel-laden trucks, as most depots lacked designated parking bays.
Current State of Tank Farms in Nigeria
According to data from Petroleumprice.ng, there are over 120 registered tank farms across Nigeria. However, only 50 remain operational, while 70 remain dormant, holding no fuel in storage. The active depots provide real-time petrol price updates, product discharge details, and loading statuses, reflecting ongoing operations.
A regional breakdown of functional depots shows:
- Lagos – 30 active tank farms
- Warri/Ogbara – 10 active depots
- Port Harcourt/Onne – 6 active depots
- Calabar – 4 operational facilities
The Dangote Refinery Effect
The challenges facing tank farm owners were compounded in October 2024, when Dangote Refinery became a dominant player in the fuel market. The naira-for-crude policy, which favors local refining, has given Dangote Refinery a significant competitive edge over independent importers. This has led to widespread financial struggles, with many tank farm owners incurring heavy bank debts, leasing their facilities, or putting them up for sale.
Industry Expert Insights
Oil and gas expert Olatide Jeremiah confirmed the decline in tank farm operations, linking it to the full deregulation of the petroleum sector.
He stated, “The subsidy removal on May 29, 2023, tripled the capital base for depot owners while shrinking their profit margins. The entry of Dangote Refinery into the mainstream further compounded the crisis, forcing some depot owners to shut down, lease, or sell their facilities.”
Jeremiah also noted that some depot owners are at odds with Dangote Refinery’s gantry loading system, which affects their ability to remain competitive.
“Many depot owners are unhappy with Dangote Refinery’s gantry loading at its terminals. His high ship prices have also discouraged some from sourcing products from him,” he added.
A Call for Industry Reform
To create a more balanced downstream sector, Jeremiah suggested a functional separation, where Dangote Refinery focuses on refining and selling fuel via ships to tank farm owners, who would then handle distribution to retail outlets.
Similarly, Chinedu Ukadike, National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), blamed the current crisis on pricing control efforts that have restricted tank farm operations.
He explained, “Many tank farm owners struggle to source products. The Nigerian National Petroleum Company Limited (NNPCL) provides pro forma invoices, but with Dangote now selling directly to retailers, most tank farm owners lack the financial capability to compete. The market dynamics have changed significantly.”
Ukadike further highlighted that the cost of gantry loading at Dangote Refinery is a major challenge for independent depot owners.
“Most depot owners can’t cope with Dangote’s gantry price, making it difficult to sustain operations,” he concluded.
Future of Tank Farms in Nigeria
With the ongoing industry transformation, tank farm owners face increasing pressure to adapt to new realities. Whether through strategic partnerships, revised pricing models, or increased investment in logistics, the survival of Nigeria’s downstream storage sector depends on innovative solutions to counteract the dominance of local refining giants.